Excerpt: (i) companies act, 1956 - section 125--pledge whether a charge requiring registration under--effect of section 45 d of (the) banking regulation act, 1949.; a charge by way of pledge is outside the provisions of section 125 of the companies act as is made clear by section 125(4)(e) of the act.; the operation of section 125 companies act is saved by virtue of the non-obstante clause of section 45 a of banking regulations act, providing that the provisions of part iiia of the banking regulation act dealing with winding up of the banking companies, would override other laws and more specifically by the language of section 45 d and in particular sub-section (4) of the act.; (ii) pledge--whether no valid pledge without physical delivery of possession to the pledgee?; hypothecation is one of.....anand, j. 1. these applications under s. 45d of the banking regulation act, 1949, by a bank, in liquidation, against a joint stock company, also in liquidation, and another joint stock company which claims to be its creditor, are based on disputes between the bank, on the one hand, and the company in liquidation and its creditor on the other, as to the nature of the indebtedness of the company in liquidation to the bank, the identity of the assets by which the debt purported to be secured, and raise some interesting questions with regard to limitation and certain provisions of the banking regulation act. 2. ideal bank ltd., now in liquidation, for short 'the bank', was carrying on the business of banking, inter alia, in delhi. pride of india pictures ltd., also in liquidation, for short.....

Judgment:

Anand, J.

1. These applications under s. 45D of the Banking Regulation Act, 1949, by a bank, in liquidation, against a joint stock company, also in liquidation, and another joint stock company which claims to be its creditor, are based on disputes between the bank, on the one hand, and the company in liquidation and its creditor on the other, as to the nature of the indebtedness of the company in liquidation to the bank, the identity of the assets by which the debt purported to be secured, and raise some interesting questions with regard to limitation and certain provisions of the Banking Regulation Act.

2. Ideal Bank Ltd., now in liquidation, for short 'the bank', was carrying on the business of banking, inter alia, in Delhi. Pride of India Pictures Ltd., also in liquidation, for short 'the company' respondent No. 1, was a company carrying on the business of exhibition of cinematographic films, inter alia, in Meerut and Hardoi. In the year 1946, the company opened a cash credit account with the bank in Delhi with a sanctioned limit of Rs. 1 lakh against the security of its assets and by a written instrument of March 26, 1946, the company purportedly created a 'pledge' of its various assets in favor of the bank to secure the repayment of the outstanding in the account. Certain other documents are also said to have been executed to secure the repayment. Subsequently, the company offered additional security by way of shares in Vanguard Insurance Co. Ltd. The charge was apparently confirmed by the insurance company. In 1952, a sum of over Rs. 1 lakh was said to be outstanding in the account and on default in repayment, the bank sought the winding up of the company on default in repayment, the bank sought the winding up of the company on the ground of its inability to pay. The petition was resisted on the ground that the debt was bona fide disputed. The plea of the company was turned down and the company was ordered to be wound up. In 1954, the bank was also ordered to be wound up on its own petition and both have since been in liquidation.

3. It appears that some time in September 1950, the company borrowed large sums of money from one Adarsh Films Ltd., respondent No. 2, for short 'the creditor', against the mortgage of its assets, including apparently some of the assets which had already been pledged with the bank. The arrangement visualised that the creditor would run two cinemas of the company and would get possession of the cinemas, and other assets for a period of four years from the date of the mortgage or for such longer period as may be necessary to recover the outstandings. There is considerable dispute about whether the creditor rendered proper accounts to the company and as to the precise liability of the company and the status of the assets held by the creditor pursuant to the aforesaid arrangement. It, however, appears that at one stage in the year 1955, the District Judge, who was then dealing with the liquidation of the company, ordered an investigation with regard to the precise indebtedness of the company to liquidator of the company sought permission of the District Judge to enter into a compromise with the creditor in terms of which all the assets of the company held by the creditor and said to be of the value of Rs. 34,000 were to be set off against the outstanding of the creditor which where then claimed to be of the order of over Rs. 66,000. The compromise contained certain other provisions.

4. It was at this stage that the bank filed the present applications in this court C.A. No. 327 of 1972 - under s. 45D of the Banking Regulation Act, 1949, claiming a sum of Rs. 1,16,000 odd from the company and another, being C.A. No. 322 of 1972 under s 45D(76) of the Act, claiming a right to the assets of the company in the hands of the creditor, challenging the validity of the compromise sought to be effected and seeking a stay of the proceedings before the District Judge. Both the applications were filed on the same date. Notices of the applications were issued to the company as also to the creditor on a number of grounds, including the plea of limitation and the jurisdiction of this court. The questions of limitation and jurisdiction were tried as preliminary issues. I, however, found that on the then state of the pleadings and the material available, it was not possible to decide the questions of limitation and jurisdiction satisfactorily and expressed the view that it would not be proper to decide these questions without giving an opportunity to the parties to produce evidence, as indeed, the liberty to seek an amendment of the pleading. In my order of July, 30, 1979, it was further pointed out that the claim was admittedly out of time on the date of winding up of the bank out could be saved by the admitted cheque payment made in 1949. It was further pointed out that the question whether the payment could save the claim for the payment order simplicities or the claim for the enforcement of the security depended in the first instance, on the existence, effect and validity of the pledge, which are in dispute, and, secondly, on the way one looked at the relief claimed in C.A. No. 327, and the other application, C.A. No. 322 of 1972. It was also pointed out that prima facie the first of these applications merely sought a simple payment order without purporting to enforce the security. While the other application sought certain order to preserve the securities without the specific enforcement of it. I have since allowed the bank to amend each of these application so as to bring out the real questions in controversy between the parties.

5. On the amended pleading of the parties, the following issues were framed :

1. Whether the petitions are barred by time

2. Whether this court has no jurisdiction to entertain the petitions

3. Whether there was any valid and subsisting pledge in favor of the bank and, if so, in respect of what property

4. Whether C.A. No. 327 of 1972 seeks to enforce any pledge

5. To what relief, if any, is the bank entitled and against whom

6. In support of the rival contentions, further material has been placed or record by the parties and I have since heard counsel for the parties at considerable length on the various questions that arise for determination.

7. My conclusions on these issues are as follows :

Issue No. 3 :

This issue is basic and is based on the plea that there was no valid and subsisting pledge in favor of the bank and that in any event, there was no indication as to the property which formed its subject-matter. This issue is crucial not only with regard to the moderation of relief but also with the outcome of the issue which would also be determinative of the question if the claim is barred by time. It was not disputed that if the claim was an unsecured debt, it was out of time in spite of admitted acknowledgment when the bank was ordered to be wound up, and that if it was a secured debt, it was within time, having regard to the acknowledgment and the provisions of the Banking Regulation Act.

Was there a valid and subsisting pledge in favor of the bank and, if so, to what property of the company did it relate, are the two questions that must be answered first.

8. The claim of the bank that the outstanding balance in the cash credit account was secured by the pledge of the assets of the company was sought to be substantiated by the statement of P.W. 1, W. C. Khurana, a former managing director of the bank, and its voluntary liquidator, and a number of documents executed by the company, the execution and genuineness of which was attested to by the witness. Exhibit P-14 purports to be an agreement on a stamp paper signed on behalf of the bank and the company and by this agreement dated March 26, 1946, it was agreed between the bank and the company that the cinematographic films and prints together with exhibition rights thereof, publicity material and the assets of Novelty and Mayfair cinemas at Meerut and property rights of Vijay Talkies and Laxmi Talkies, Hardoi, and uncalled capital of the company, present and future and stock-in-trade, together with the receipts of the company by way of share money, booking money etc., etc., were pledged with the bank and shall be considered to be in the exclusive possession and under the exclusive control of the bank an be held as security for the due payment by the company of the balance in the cash and current account. But this agreement, the company bound itself not to pledge or otherwise charge or encumber any of the assets nor to permit any act whereby the security may, in any way, be prejudicially affected. The agreement further provides that the company would render full account to the bank of the receipts from and by way of exhibition of the pictures pledged with the bank and the securities would be duly insured. There are other provisions in the agreement with regard to the margin and certain other matters which are not relevant for our present purpose. By Ex. P-12, the company under took to deposit all monies received by it in terms of the agreement. But Ex. P-13, company assured the bank that the aforesaid deed would be duly registered with the Registrar within two weeks and the company would submit a weekly statement of account of the cinemas at Meerut and that certain other provisions would also be made which were required by the bank for the operation of the cash credit account. This letter is of January 6, 1947. By Ex.P-11, which is of March 25, 1946, the company requested the bank for the operation of the cash credit account. This letter is of January 6, 1947. By Ex. P-11, which is of March 25, 1946, the company requested the bank to total amount of the debt of the company would come to Rs. 1 lakh. Exhibits P-16, P-17 and P-18 are lists of machinery, furniture, etc., in Novelty, Meerut, Jagat theatres and Mayfair theatres respectively, and these bear the signature of the partner of Nafees Corporation, the managing agent of the company. Exhibit P-15 is the company's letter of April 5, 1946, asking the bank for delivery of certain publicity material in respect of some pictures apparently forming the subject-matter of the pledge. But Ex P-24, the Vanguard Insurance Co. confirmed the lien on the shares in favor of the bank.

9. On the basis of the material, it was hardly possible for the company or its creditor to cast any doubt on the existence of a cash credit account secured by a number of assets of the company or to dispute that the company was liable to the bank on the material date for the amount outstanding against it in the cash credit account. These documents, however, are far from being free of a number of infirmities and the company and its creditor naturally sought to take full advantage of these infirmities to defeat the claim of the bank on the ground that there was no valid or subsisting pledge in favor of the bank and there was no indication in these documents as to the assets which formed the subject-matter of the securities.

10. In the first instance, it was urged that the agreement, Ex. P-14, was ineffective in that it was not registered with the Sub-Registrar, even though it purported to affect immovable property of the company and to create a charge over its assets. There is no substance in this contention. Exhibit P-14 does not purport, on its terms or in the context of any other material, to deal with any immovable property of the company. It was in fact conceded that the company had no immovable property among its assets at any stage and held that various cinemas on lease and the leasehold rights in the various cinemas were not specifically made part of the agreement, even though there are vague references in the document to 'property rights'. Such a document, thereforee, did not need to be registered, since it did not purport to transfer any interest in any immovable property of the company. It is interesting to notice in this context that the bank had laid no claim to the leasehold rights in any of the cinemas and the claim for the enforcement of the securities is confined to the assets of the company consisting of machinery, equipment, furniture, fittings, fixtures, cinematographic films, prints, exhibition rights, publicity material, stock-in-trade and certain other assets. It is, thereforee, not possible to hold that on account of non-registration of the document, there was no valid or subsisting pledge of the assets of the company in favor of the bank.

11. Secondly, it was urged that the charge created by Ex. P-14 over the various assets of the company by pledge, etc., became void as against the official liquidator of the company and its creditor on the order to wind up the company, by virtue of s. 125 of the Companies Act, as the charge was not registered with the Registrar of Companies. It was not disputed on behalf of the bank that the charge was never registered and the challenge to its validity, thereforee, appears to be formidable at first sight. It, however, does not survive on a closer scrutiny. A charge by way of pledge is outside the provision of s. 125 and this is made clear by s 125(4)(e). It was, however, not disputed that some of the its, which were made the subject-matter of the charge, like the uncalled capital would, however, be within the mischief of the section. The operation of s. 125, however, appears to be saved by virtue of the non obstinate clause of s. 45A and more specifically by the language of s. 45D and in particular sub-s. (4) of it. Section 45A of the Banking Regulation Act provides that the provisions of Pt. III-A of the Act dealing with winding up of banking companies would override other laws. Section 45D provides that 'Notwithstanding anything to the contrary contained in any law, for the time being in force.' the High Court may settle in the manner provided the list of debtors of a banking company which is being wound up Sub-section (4) of this section further provides that at the time of such settlement, 'the High Court shall pass an order for the payment of the amount due by each debtor and make such further orders as may be necessary in respect of the relief claimed, including reliefs against any guarantor or in respect of the realisation of any security.' The expression 'any security' in sub-s. (4) of s. 45D would be wide enough, having regard to the scheme of Pt. III-Am, the non obstinate clause in s. 45A and the phraseology of s. 45D to include the security, the charge in respect of which is hit by s. 125 of the Companies Act. This would also be consistent with the purpose for which the special provisions were made in the Banking Regulation Act.

12. In the third instance, it was contended that in the absence of Schs. A to E, referred to in the document, Ex. P-14, it was not possible to establish the identity of the various items of assets sought to be pledged or charged and for that reason also it could not be said that there was a valid or subsisting pledge in respect of the assets of the company. Now, it is true that the agreement gives the description of the various heads of assets and contemplates that they are more specifically listed in the schedules said to form part of the agreement, but the schedules are not available apparently having been misplaced during the partition since the bank was a Muslim concern. The bank has, however, been able to salvage three lists referred to above Exs. P-16, P-17 and P-18, which purport to be lists of machinery furniture, etc., in three of the cinemas mentioned above. The absence of the schedules, however, does not render the agreement ineffective nor does it cease to be valid or subsisting for that reason. This is because the document itself contains sufficient description of the assets so as to identify the same even without further details, which were intended to be set out in the document rendered the schedules quite unnecessary and the same may not even have been drawn. It is interesting to notice in this context that there is no indication in the agreement if any of the assets of the company had been mortgaged, pledged or hypothecated earlier with any bank or creditor. There are also references in the agreement that the company would render a true and proper account of virtually all its dealings to the bank and that the company would hold these assets as the trustee of the bank during the operation of the cash credit account. From the tenor of the document, it appears, as is also constituent with the normal practice, that the balance in the account was intended to be secured by all the movable assets of the company and the agreement is sufficiently descriptive of these assets, even in the absence of the schedules or the lists. The schedules would have been of some consequence, if the pledge was to be limited to some of the assets and the fact that the company has not been able to produce its copy of the schedules fortifies the belief that there was no limit on the assets sought to be offered as security. I have, thereforee, no hesitation in holding that the balance in the cash credit account was secured by all the assets which are described in the document. In any event, I fail to see how, in the absence of schedules, the agreement could be said to be either invalid or ineffective so long as the various assets are adequately described and could reasonable be identified. Some of these assets are, in any event, beyond controversy such as uncalled capital of the company, present and future receipts of the company by way of share money, booking money, cinematographic films, prints, exhibition rights and publicity material, machinery, equipment, furniture, etc., in the various cinemas, which are specifically mentioned. Even if the absence of the schedules may perhaps have some effect on the relief that may eventually be granted to the bank against the creditor of the company, an aspect which I would deal with later, there is no ground to hold that for any reason, the agreement is not valid or is not subsisting or that there is no indication as to the assets which were offered by way of security.

13. Lastly, it was urged that there was no valid pledge because no part of the assets were physically delivered by the company to the bank and that one of the essential conditions of a valid pledge was, thereforee, not satisfied. It was further urged that some of the assets described in the agreement could not possibly have formed the subject-matter of the pledge at all. Now, it was not disputed that none of the assets sought to be pledged were delivered to the bank at any stage nor was it disputed that the uncalled capital of the company and the receipts of share money or booking money could not have formed the subject-matter of a 'pledge' though these could be validly made subject-matters of charge. This contention, however, ignores the provision of the agreement that all the items of securities would be 'considered to be in the exclusive possession and under the exclusive control of the bank in such a manner that such possession and control shall be apparent and indisputable'. This clearly changed the relationship between the assets and the company and on the execution of the agreement, the company continued to hold the assets not in its capacity as its owner but as a trustee for the bank. This was enough to constitute constructive delivery of the pledged goods to the bank, even though actual delivery was never made. The constructive delivery coupled with the agreement conferred on the bank special property in the pledged goods and the requirements of a valid pledge were, thereforee, fully satisfied. In any event, the mortgage of movable property is a recognised form of hypothecation and such hypothecation confers a good title upon the persons in whose favor it is made even in the absence of possession and the law recognises the transaction was security and equity gives effect to it AIR 1969 AP 201 (sic) and Pramatha Nath Talukdar v. Maharaja Probirendra M. Tagore, : AIR1966Cal405 ). It has been recognised that such a transaction is not only valid but is customary throughout the country and even resorted to by banks with a view to enable the pledges to carry on business with the pledged property. (Haripada Sadhukhan v. Anath Nath Dey AIR 1918 Cal 165 : 22 CWN 758 : 44 IC 211 : [1911] 7 Nag LR 72 and Simla Banking and Industrial Co. Ltd v. Pritams, ). It is well known that hypothecation is one of the species of pledge and it is immaterial if possession is, in fact, delivered or not and in all cases of pledge and hypothecation, there is the right to take possession and dispose of the property forming the subject-matter of contract. For all these reasons, it could not be said that there was no valid pledge or that the debt was not fully secured. It is, however, true that there could be no pledge or hypothecation in respect of the share money, booking money and the uncalled capital of the company and the only effect of the agreement in relation to these assets was the creation of a charge in favor of the bank over these rights.

14. For all these reasons, the issue must be answered in the affirmative and I hold that all the assets of the company were pledged/hypothecated or charged. Excluding the leasehold rights in the various cinemas and the debt was fully secured.

15. Issue No. 4.

This issue is based on the averment that C.A. No. 327 of 1972 embodies a claim simplicities for the recovery of money or for settlement but does not seek to enforce any security.

As has been pointed out above, C.A. No. 322 and C.A. No. 327 were filed simultaneously in this court when a compromise was sought to be effected between the company and its creditor. C.A. No. 327 in its original form merely sought an order for the company to pay the outstandings of the bank. In the course of the application, it was mentioned that the outstanding was a 'secured debt' and that the company had pledged all its assets, including uncalled capital, as security for payment of the balance but the application did not contain a prayer for the enforcement of the security, except in col. 12 of the printed opening sheet C.A. No. 322, however, even in its original form, sought to enforce the security in that a direction was sought against the creditor to deposit all realisations made by it on the ground that the creditor had been in possession of the assets pledged with the bank. The creditor had been imp leaded as party respondent in both the applications. In C.A. No. 327/72, the bank had directed the order application in para. (3) as 'the Main Petition'. It is, however, true that the applications were not happily worded and there was, thereforee, some justification for the respondents to urge that there was no attempt to enforce the securities by any of these applications, even though the factum of pledge was mentioned in both the applications and permission of the court was sought to preserve the securities in C.A. No. 322. The position has, however, since changed because while considering the question of limitation and jurisdiction as preliminary issues. I found that the state of the pleadings was not happy. The applications have, however, since been amended with the leave of the court and the amended C.A. No. 327 in terms, seeks the relief of enforcement of the securities for the payment of the bank's outstandings. It is true that the form in which the security is sought to be enforced still does not conform to the strict requirement of the CPC but to my mind, that would not stand in the way of the company court to give appropriate relief where the bank manifestly intends to secure the enforcement of the security for the realisation of its outstanding against the borrower. This is not a suit on a mortgage or for the enforcement of a pledge. Section 45D does not prescribe any particular form. Sub-section (4) merely empowers the court to make 'such further orders as may be necessary in respect of the relief claimed, including reliefs against any guarantor or in respect of the realisation of any security'. It is, thereforee, not possible to hold that C.A. No. 327 does not seek to enforce any security and the issue is answered accordingly.

16. Issue No. 1

This issue raises a question whether the claim is barred by time. The agreement of pledge is of March 26, 1946. The bank was wound up in July, 1954. The applications were filed in May, 1972. The period of limitation stopped running after the winding-up order by virtue of s. 45-O of the Banking Regulation Act. The claim, however, had become barred by time before the order of winding-up unless the period is extended by an acknowledgment or payment before the expiry of limitation. There was an undisputed payment by the company to the bank on October 29, 1949. This extended the limitation only by three years if the acknowledgment was the acknowledgment of liability, but, if the acknowledgment also enured for the benefit of the security, them the period of limitation was extended by six years, in which case it would go beyond the date on which the bank was wound up. The short question for decision is whether the acknowledgment by the company of its liability, by payment in October, 1949, enured not only for a claim of payment but also for the enforcement of security.

It was not disputed that there would be no question of limitation if the claim was within time when winding-up proceedings were initiated. It was also not disputed that having regard to the date on which the cause of action arose and the confirmation of liability in the subsequent balance sheets of the company, the claim was not of time at the time of the institution of proceedings for winding-up of the bank unless and to the extent the limitation was extended by payment of part of the amount by the creditor to the bank. It was also not disputed that part payment was made to the bank by cheque on October 29, 1949, and the cheque was encased on October 31, 1949. If the limitation for the claim be three years, then, obviously, the claim became barred by time by October, 1952, the liquidation proceedings having been initiated in 1954. If, however, the limitation for the claim be six years, it was not barred by time by 1954. That, thereforee, is the crucial question that arises. It was also not disputed that as suit for the enforcement of security would be governed by art. 120 of the Indian Limitation Act of 1908, corresponding to art. 113 of the present Act, which provides the limitation of six years and by virtue of the payment, the claim would ordinarily be within time in 1954. It is, however, urged that the payment and/or acknowledgment implicit in it would ensure in relation to the liability of the creditor to the bank but not in relation to the security. Now, it is true that there in nothing in the payment or the manner in which it is made which may indicate an express acknowledgment of the relationship between the parties as pledge or pledges and there was no express acknowledgment with regard to the relationship between the parties as such pledges or pledgees or hypothecator or hypothecatee. There are no decisions either way if, where there is a payment, it would extend the limitation for a suit simplicities for recovery of money or for a suit for enforcement of security. It is, however, difficult to say no principle that such a payment would ensure for the liability as a debtor but not for the purpose of enforcement of the security. Explanationn (a) to s. 18 of the Limitation Act provides that an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right. There is authority for the proposition that it would be enough if the right claimed in the suit is a legal consequence of the matter which has been admitted (Sukhamoni Chowdhrani v. Ishan Chunder Roy [1898] 25 Cal 844 : 25 is 95 : 2 CWN 402) and that the acknowledgment need not directly refer to the liability sought to be enforced in the suit. (Sankara Pillai Kujukrishna Pillai v. Ananda Pillai Bharathi Amma 1957 2 Ker 859 and Jainarain v. Governor General of India, : AIR1951Cal462 ). It is also unnecessary that there should be identity between the liability admitted and the precise relief sought in the suit. The acknowledgment is of liability which is admittedly a secured liability. The acknowledgment is of liability which is admittedly a secured liability. The acknowledgment extends the limitation for the enforcement of the liability and enforcement of the security is one of the modes for the enforcement of the liability. A faint suggestion was made on behalf of the company, on the basis of a decision of the Bombay High Court (Percy F. Fisher v. Ardeshir Hormasji Gazdar AIR 1935 Bom 213 : 37 Bom LR 165), that a mere suit for payment by the disposal of the pledged property would be a suit for recovery of money for which there would be a limitation of only three years. This decision is based on an earlier decision of that court AIR 1930 Bom 218. It is however, not possible to presume that the bank would have filed a suit for recovery rather than a suit to enforce a pledge. There is considerable authority for the proposition that a suit to enforce a pledge would be covered by the residuary art. 120, corresponding to art. 113, of the present Act.

It was not urged that the applications were barred by time by virtue of art. 137 of the new Act, which has been held to be applicable to the applications under special statutes. Such a contention would not have been open because s. 45-O(1) of the Banking Regulation Act provides that the limitation would not run in such cases, notwithstanding the provisions of the Limitation Act, 1908, or any other law for the time being in force to the contrary. The present Limitation Act would be within the mischief of sub-s. (1) of s. 45-O and there would be no limitation for these applications in spite of art. 137. For all these reasons, it is not possible to hold that the claim or the present applications were barred by time.

17. Issue No. 2

This issue raises the question whether this court has no jurisdiction to entertain the applications. The plea of want of jurisdiction was raised on the basis of the provisions of s. 45D(10) of the Banking Regulation Act. Section 45D(10) would, however, have no application unless the matter involves a proprietary right in immovable property. Neither the company nor its creditor claims any proprietary right in an immovable property. In any event, I have already held that no part of any immovable property forms the subject matter of the pledge, hypothecation, etc. True, there is a reference in the agreement with regard to registration but that would not by itself be determinative of the true legal position. Section 45D(10) is, thereforee, clearly inapplicable and there is, thereforee, no want of jurisdiction in this court to deal with these applications.

18. Issue No. 5

That leaves for consideration that the question as to relief. It was not disputed that once the question of limitation and jurisdiction were out of the way, the company would be liable to pay to the bank the amount claimed by it. It was also not disputed that in view of the charge created on the uncalled capital the bank would be entitled to have recourse to the same and the official liquidator of the company would be bound to call the uncalled capital of the company and make over the proceeds to the banks towards the diminution of its liability. It was also not disputed that the bank would be entitled to have recourse to the shares which were charged. The only question is as to the relief to be granted against the creditor of the company, who had the custody and control of at least two cinema houses which were on lease with the company, including their fittings, fixtures, machinery etc., and who for years carried on the business of exhibition of cinematographic films pursuant to the deed of mortgage entered into between the company and the creditor. The creditor never rendered any account to the company of its dealings with these assets and the proceeds of the business. The attempt by the District Judge, for accounts proved abortive. That the creditor held some of the assets of the company is admitted in the proceedings before the District Judge in which sanction was sought for a compromise. In the absence, however, of the details of the pictures, fittings, fixtures, furniture, equipment, etc., in the deed of pledge, it is difficult to establish the identity of the assets at present held by the creditor. The various cinemas were held by the company on leases for different periods and these periods having since expired, the cinemas naturally reverted to the landlords. In the absence of a proper account of the dealings of the creditor with the various assets of the company, it is not possible to pinpoint if the creditor is liable to the company for any amount or for restoration of its assets beyond the assets admitted by the creditor to be in its possession.

If the mortgage and/or pledge created by the company in favor of the creditor was in respect of the assets which had earlier been pledged or hypothecated with the bank, there would be no difficulty in holding that such mortgage and/or pledge would be subject to the prior rights of the bank. In the absence of schedules to the deed of pledge, the identity of the assets is not established. It is, thereforee, not possible to hold that the mortgage and/or pledge in favor of the creditor is subject to the prior rights of the bank as pledgee or hypothecatee, particularly where physical possession of none of these assets was at any stage taken by the bank and the bank was satisfied merely by a provision in the deed that the company would be holding the assets as its trustee. There was no floating charge on future assets with the result, the relief must be confined to such of the assets as formed the subject matter of the pledge, etc., and can be identified.

It is, however, not possible to relieve the creditor altogether unless is established on a proper rendition of accounts that the debt secured by the mortgage deed had not been fully discharged and there are still outstandings in favor of the creditor which would exceed the value of the assets at present held by the creditor as also with regard to the true valuation of those assets.

Having regard to all the circumstances, I would make the following directions :

(a) The company is indebted to the bank to the extent of Rs. 1,16,775.67 and is liable to pay interest on the amount at 6% p.a from the date of the applications till the date of payment;

(b) The company is directed to pay the aforesaid amount with interest to the bank;

(c) The bank would be entitled to recover the aforesaid amount from any asset of the company, whether in the hands of the company or its creditor, which could be identified as the asset which formed the subject matter of the deed of pledge. The bank would also be entitled to the realisation of its outstandings from the proceeds of call on the contributories of the company for the uncalled capital and the official liquidator of the company would like all such steps as are necessary for the purpose. the company would also be liable to recover its outstandings from the shares of Vanguard Insurance Company, in respect of which a charge was created in favor of the bank by a former director of the company.

(d) The company would also be entitled to the realisation of the outstandings by payment of such surplus as may be found, on a proper rendition of accounts, to be in the hands of the creditor.

(e) the creditor would render a true and proper account of all its dealings with the assets of the company under the deed of mortgage to the District Judge within six weeks and to pay the surplus, if any, to the bank within two weeks of the rendition of such accounts. If the creditor fails to render the accounts, the District Judge would take all such steps as may be necessary to obtain a complete account of the dealings of the creditor, with the assets, including an account of the outstandings of the creditor, the realisations made by the creditor from time to time and the true valuation of the assets at present held by the creditor, in the proceedings pending before the District Judge. The stay of proceedings before the District Judge is vacated and on the rendition of accounts and payment to the bank, if any, the District Judge would dispose of the proceedings for compromise in accordance with law.